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Questions and Answers
What is the formula for calculating Net Asset Value (NAV)?
What is the formula for calculating Net Asset Value (NAV)?
Which of the following correctly defines tangible assets?
Which of the following correctly defines tangible assets?
In terms of personal finance, what does a negative net worth indicate?
In terms of personal finance, what does a negative net worth indicate?
What does the formula for Future Value (FV) represent?
What does the formula for Future Value (FV) represent?
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Which of the following best describes opportunity cost?
Which of the following best describes opportunity cost?
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How are current liabilities defined?
How are current liabilities defined?
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What does the term 'personal opportunity cost' primarily refer to?
What does the term 'personal opportunity cost' primarily refer to?
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What distinguishes non-current assets from current assets?
What distinguishes non-current assets from current assets?
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What is the primary purpose of liquidity ratios?
What is the primary purpose of liquidity ratios?
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Which financial ratio category assesses a company's ability to generate profits?
Which financial ratio category assesses a company's ability to generate profits?
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What is the tax rate for income ranging from 250,001-400,000 pesos in 2023?
What is the tax rate for income ranging from 250,001-400,000 pesos in 2023?
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Which entity was established to maintain monetary stability in the Philippines?
Which entity was established to maintain monetary stability in the Philippines?
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What is included in the definition of taxes?
What is included in the definition of taxes?
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Which financial ratio reflects a company's operational efficiency?
Which financial ratio reflects a company's operational efficiency?
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What is the upper limit for the income tax rate for earnings above 8 million pesos?
What is the upper limit for the income tax rate for earnings above 8 million pesos?
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What is the role of efficiency ratios in financial analysis?
What is the role of efficiency ratios in financial analysis?
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What does the term 'personal finance' encompass?
What does the term 'personal finance' encompass?
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Which statement best describes the purpose of financial statements?
Which statement best describes the purpose of financial statements?
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What equation represents the relationship between assets, liabilities, and equity?
What equation represents the relationship between assets, liabilities, and equity?
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What does an income statement primarily report on?
What does an income statement primarily report on?
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What is the definition of debt in the context of personal finance?
What is the definition of debt in the context of personal finance?
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Which financial statement summarizes cash flow into and out of a company?
Which financial statement summarizes cash flow into and out of a company?
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How does equity relate to assets and liabilities?
How does equity relate to assets and liabilities?
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What are liabilities in a company context?
What are liabilities in a company context?
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What is the primary function of a universal bank?
What is the primary function of a universal bank?
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Which type of bank primarily focuses on savings accounts and home mortgages?
Which type of bank primarily focuses on savings accounts and home mortgages?
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What distinguishes a cooperative bank from other types of banks?
What distinguishes a cooperative bank from other types of banks?
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What is a common characteristic of checking accounts?
What is a common characteristic of checking accounts?
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Which bank service is specifically designed for exchanging currencies?
Which bank service is specifically designed for exchanging currencies?
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What type of banking serves both Muslims and non-Muslims while providing alternative financial services?
What type of banking serves both Muslims and non-Muslims while providing alternative financial services?
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In what way do banks generate income from loan services?
In what way do banks generate income from loan services?
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Which bank classification primarily serves rural communities with customized services?
Which bank classification primarily serves rural communities with customized services?
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Study Notes
Introduction to Personal Finance
- Finance is the study and system of money, investments, and other financial instruments.
- Personal finance focuses on managing personal money, saving, and investing to achieve financial goals.
- Income is money received for work provided.
- Expense is money spent on products or services.
- Saving is income remaining after spending.
- Debt is money owed.
- Investment is purchasing financial products for future income.
- Asset is a valuable possession.
The Financial Statement
- Financial statements are formal records summarizing financial performance and position.
- Accounting statements are formal financial reports summarizing a business's financial health and performance.
- Key financial statements:
- Income Statement: Reports revenue, expenses, and profit.
- Cash Flow Statement: Shows cash entering and leaving a company.
- Balance Sheet: Displays assets, liabilities, and equity at a specific point in time.
Understanding Assets, Liabilities, and Equity
- Assets are anything of value owned by a company.
- Liabilities are any money owed by a company to external parties.
- Equity is the money attributable to the owners of the business.
Types of Assets
- Tangible Assets: Cash, Inventory, Accounts Receivable.
- Intangible Assets: Property, plant, and equipment.
- Current Assets: Assets with a lifespan of less than a year.
- Non-current Assets: Assets with a lifespan of more than a year.
Types of Liabilities
- Current Liabilities: Liabilities due within a year.
- Non-current Liabilities: Liabilities due after a year.
Net Asset Value (NAV)
- Also known as Net Tangible Assets.
- The book value of tangible assets less intangible assets and liabilities.
- Calculated as NAV = Tangible Assets - Intangible Assets - Liabilities.
Personal Financial Statements
- A document outlining an individual's financial position at a given time.
- Lists all assets and liabilities.
- Net worth is determined by subtracting liabilities from assets.
- Positive net worth indicates more assets than liabilities.
Cost and Time Value of Money
- A sum of money is worth more today than the same sum in the future due to the potential for investment and earning interest.
- Future Value (FV) = Present Value (PV) (1 + i/n)^(n*t)
- PV = Present Value of Money
- i = Interest Rate
- n = Number of Compounding Periods per Year
- t = Number of Years
Opportunity Cost
- The potential benefits missed by choosing one option over another.
Personal Opportunity Cost
- The value of what's given up in personal satisfaction, time, or well-being when making a choice.
Financial Opportunity Cost
- The potential monetary gain or savings forgone by choosing one financial decision over another.
Ratio Analysis
- Method for examining a company's balance sheet and income statement to assess liquidity, efficiency, and profitability.
- Examples: current ratio, gross profit margin ratio, and inventory turnover ratio.
5 Major Categories of Financial Ratios
- Liquidity Ratio: Measures a company's ability to pay short-term liabilities
- Efficiency Ratio: Measures a company's effectiveness in using resources
- Profitability Ratio: Measures a company's ability to generate profits from assets
- Market Value Ratio: Evaluates the share price of a company.
- Leverage Ratio: Evaluates a company's debt levels.
Individual Incoming Tax
- Tax is a mandatory contribution levied by a government.
- Income tax is levied on individuals or entities based on earned income or profits.
Banks and Financial Institutions
- Bank: A financial institution licensed to receive deposits and make loans.
- Bangko Sentral ng Pilipinas (BSP): The central bank of the Philippines, responsible for maintaining price stability, promoting monetary stability, and ensuring the convertibility of the Peso.
Classification of Banks
- Universal Bank: Offers a full range of financial services, including credit, deposits, investment advisory, and securities transactions.
- Commercial Bank: Accepts deposits and offers various banking and financial products.
- Thrift Bank: Specializes in savings accounts and home mortgages.
- Rural Bank: Provides financial services to rural communities.
- Cooperative Bank: Owned and controlled by cooperative organizations, providing financial services to cooperatives and their members.
- Islamic Bank: Operates according to Islamic principles, offering finance services to both Muslims and non-Muslims.
Basic Bank Services
- Checking Account: Allows for bill payments and withdrawals, typically low-interest with fees.
- Savings Account: Pays interest on deposits, varying interest rates based on account type (regular savings or time deposit).
- Loan Services: Banks lend money to consumers and businesses.
- Foreign Exchange (ForEx): Banks offer currency exchange services at competitive rates.
- Investment Products: Banks offer investment vehicles based on underlying securities.
- Remittance: Banks facilitate fund transfers from one account to another.
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Description
This quiz covers the fundamentals of personal finance, including concepts such as income, expenses, saving, debt, and investments. Additionally, it delves into the importance of financial statements, such as income statements, cash flow statements, and balance sheets, for assessing financial health. Test your knowledge on key financial principles and associated terminology.
